Follow the author of this article

Follow the topics within this article

British pensioners living in Europe face a drop in their incomes unless a post-Brexit deal on personal pensions is secured, MPs are warning.

The problem is caused by insurance contracts – such as annuity payments – which may not be able to continue paying out to overseas customers after Britain leaves the EU, in March 2019.

In a letter to Philip Hammond, the Chancellor, Treasury committee chair Nicky Morgan said unless a deal is struck insurers will lose the right to service these contracts. She said insurers were being put into a bind where they "must break the contract or the break the law".

Currently British firms have "passporting rights" which allow them to offer cross-border insurance. These will end with Brexit, unless new arrangements are secured.

Ms Morgan warned: "Citizens – including many UK expatriates – living in the rest of the European Economic Area in receipt of personal pensions may face difficulties getting paid".

Likewise, people living in Britain but receiving pensions from companies based in Europe will "find themselves in the same situation", she said.

The Association of British Insurers, the industry trade body, warned of this scenario in June.

It said cross-border pensions payments and business liability insurance contracts were particularly at risk.

As Telegraph Money reported last week, Britain and the EU have reached an agreement that will see no change to state pensions after Brexit.

Annuities normally pay a guaranteed sum each month and run from retirement for life. They have become far less popular since 2015 when reforms were introduced that meant savers could take their entire pension pots as cash, but millions of policies remain in force, with retirees reliant on the income they produce.

Annuity specialist Billy Burrows, of Retirement IQ, said that in many cases British expats retained property and bank accounts in the UK making it hard for insurers to know whether or not they were living abroad.

Broker Hargreaves Lansdown's Tom McPhail played down fears.

He said: "Given the extent to which European regulation and legislation already sets the agenda for domestic UK regulation of financial services, it shouldn't be too challenging to reach an accommodation whereby business can continue as usual."